It is one of the most frustrating experiences in the Texas deregulated energy market: you open your monthly electricity bill, and it is double or even triple what it was the month before. You haven’t changed your energy habits, you haven’t bought new appliances, and the weather hasn't changed dramatically.
What happened? You likely fell victim to a holdover rate.
In this guide, we will break down exactly what holdover rates are, why retail electric providers (REPs) use them, and how you can protect yourself from this costly billing practice using GetElectricity.
What is a Holdover Rate?
In the Texas retail electricity market, a holdover rate is a month-to-month variable rate that a provider automatically applies to your account when your fixed-price contract expires and you haven't signed a new plan.
When you initially sign up with an electricity provider, you typically select a fixed-rate contract lasting 12, 24, or 36 months. This contract locks in your energy rate for that duration. However, when that contract ends, you enter what is known as "limbo." If you do not actively choose a new contract—either by renewing with your current provider or switching to a new one—your provider is legally allowed to transition you to their default month-to-month plan.
Unlike your fixed-rate plan, a holdover plan has no rate guarantees. The price of electricity is tied to the wholesale market and can adjust dynamically at the provider's discretion.
Why Do Providers Use Holdover Rates?
Retail Electric Providers operate as intermediaries in the Texas energy grid (ERCOT). They purchase bulk electricity on the wholesale market and sell it to residential and business consumers.
When you are on a fixed-rate contract, the REP takes on the risk. They must purchase hedges and futures to secure your locked-in rate, regardless of how high wholesale market prices spike during hot summer days.
When your contract expires, the REP no longer wants to carry that risk. By shifting you to a variable holdover rate, they transfer all market risk directly to you. If wholesale prices spike, your rate spikes. Even when wholesale prices are low, providers often price holdover rates significantly higher than competitive fixed plans as a premium for the convenience of month-to-month service.
The True Cost of Month-to-Month Limbo
The markup on holdover rates can be shocking. It is common for a fixed rate of 12¢ per kWh to jump to a variable rate of 20¢ to 28¢ per kWh once the contract expires.
Below is an interactive comparison detailing the billing cost difference for a typical Texas home consuming 1,200 kWh per month under a fixed contract vs. default holdover rates:
Over the course of just a few months, staying on a holdover rate can cost you hundreds of dollars in unnecessary premiums.
How to Tell if You are on a Holdover Rate
To check if you are currently paying a holdover rate:
- Locate Your Latest Bill: Look at the detail section of your monthly statement. Look for terms like "Default Plan," "Variable," or "Month-to-Month."
- Review Your EFL: Locate your plan's Electricity Facts Label. If the term of the contract is listed as month-to-month, you are on a holdover rate.
- Check the Expiration Date: Many statements print your contract end date. If that date has passed, you have already transitioned.
How to Protect Yourself: The 14-Day Switch Rule
Many Texans believe they must wait until the exact day their contract expires to switch providers, fearing they will be hit with an early termination fee (ETF).
Under the Texas Administrative Code (TAC), Title 16, §25.475, you are legally permitted to switch to a new electricity provider without penalty up to 14 days before your contract's expiration date.
By shopping within this 14-day window, you can schedule your new service to start on or right before your contract end date, ensuring a seamless transition and preventing your current provider from ever rolling you onto a holdover rate.
Let GetElectricity Manage Your Expiring Contracts
Keeping track of contract expiration dates, shopping windows, and active rate sheets can feel like a part-time job. That is why we built GetElectricity.
GetElectricity connects directly to your Smart Meter Texas (SMT) historical usage data. When you set up an account:
- We track your contract end date automatically.
- We analyze your home's exact consumption profile.
- We monitor the active Texas market to find the best 12, 24, or 36-month fixed contracts that match your specific usage.
- We alert you when your 14-day penalty-free switch window opens, helping you move to a new plan before the holdover trap triggers.
Don't let month-to-month variable rates inflate your electric bill. Sign up with GetElectricity today and keep your home locked into the lowest possible rates.